Understand how we got here — and how to move forward.


September 20, 2019

Pelosi unveils bill to lower Rx drug prices. (But will it pass Congress?)

Daily Briefing

    House Speaker Nancy Pelosi (D-Calif.) on Thursday unveiled a highly anticipated bill that aims to reduce prescription drug prices in the United States.

    New report: 4 steps needed to realize pharmacy’s full value

    Bill would give HHS secretary price negotiating authority for certain drugs

    The bill, called the Lower Drug Costs Now Act, would allow the HHS secretary each year to negotiate prices for between 25 and 250 high-cost drugs that lack generic or biosimilar competition on the market. The bill would direct the HHS secretary to account for both price and volume sold when considering which drugs to select, which Politico reports could exclude high-priced but low-volume drugs for rare diseases. 

    The bill would require drugmakers to adopt the negotiated prices for Medicare reimbursement, and to offer the negotiated price to insurers in the private market, meaning the negotiated prices could be available to all consumers.

    The bill would establish a drug price ceiling for the negotiations based on the prices paid for the drugs in other countries—which is somewhat similar to a White House proposal that would tie payments for drugs covered by Medicare Part B to certain international prices. The bill would not allow drug prices to be set at more than 1.2 times the volume-weighted average of the prices paid in Australia, Canada, France, Germany, Japan, and the United Kingdom.

    The bill would allow HHS to penalize pharmaceutical companies that refuse to negotiate prices with the department with a 65% tax on the drug's annual gross sales from the previous year. That penalty would increase by 10 percentage points for every quarter that a deal remains unstruck, with the penalty maxing out at 95%.

    If a drugmaker negotiates a price with HHS but then overcharges Medicare or does not provide other payers the negotiated price, HHS could levy a civil penalty equivalent to 10 times the difference between the negotiated price and the offered price.

    Bill would set new price increase, out-of-pocket cost controls

    In addition, the bill would set limits for prescription drug price increases.

    The bill would require pharmaceutical companies to either lower the prices of drugs covered by Medicare Parts B and D if the drugs have experienced price hikes at rates above inflation since 2016, or pay a rebate worth the entire difference in the price above inflation to the Department of the Treasury. The House bill states that setting the base year of inflation as 2016 would reverse unjustified price increases that have occurred over the past three years of price.

    The bill also would create an out-of-pocket maximum of $2,000 for prescription drugs purchased through Medicare Part D.

    Next steps

    House committees are expected to advance the bill in coming weeks, with the goal of passing it out of the House by the end of the year.

    However, CNBC reports the bill is likely to get pushback from Republicans who have long objected to federal oversight of prescription drug prices, which means it could face opposition in the Senate where Republicans hold the majority. That said, some observers have said President Trump, who has called for allowing Medicare to negotiate prices, may be able to sway Republicans if Democrats can win his support.   

    Trump in a tweet Thursday said that "it's great to see" Pelosi's bill, but also touted his support for an alternative drug pricing bill sponsored by Sen. Chuck Grassley (R-Iowa).


    The bill drew strong opposition from drugmakers.

    PhRMA President and CEO Stephen J. Ubl said the bill would give "the federal government unprecedented, sweeping authority to set medicine prices in public and private markets while importing price controls from other countries that restrict access to innovative medicines."

    Jim Greenwood, president of the Biotechnology Innovation Organization, which represents biotechnology companies, said, "This proposal crushes the desperate hopes of patients and their families that life science innovators will be the answer to their prayers." He added, "It abandons any pretense of allowing a free and fair market system to determine the value of prescription medicines, including for the most innovative medical breakthroughs. It will extinguish any incentive for investors to provide the necessary funds to advance biotech medical discovery."

    Meanwhile, AHIP in a statement said it supported many of the bill's proposals, "such as out of pocket limits for seniors and ensuring manufacturers have meaningful accountability for their prices and price increases."

    American Hospital Association EVP Tom Nickels in a statement applauded the bill, which the organization said "takes significant strides toward reducing out-of-control drug prices, which continue to place patients and the providers who care for them at risk"

    Federation of American Hospitals President and CEO Chip Kahn in a statement said, "[W]e appreciate Speaker Pelosi taking meaningful action to address drug costs. FAH looks forward to working with Congress to ensure our patients have access to affordable medications."

    AARP in a statement also showed support for the bill. The association said, "The Lower Drug Costs Now Act addresses AARP's key priorities for lowering drug prices and the costs older Americans pay, including an out-of-pocket cap on prescription drugs for seniors in Medicare Part D, a crack-down on drug price increases, and Medicare negotiation authority, which would enable the federal government to leverage its buying power to lower prices" (Lovelace, CNBC, 9/19; Davis, NPR, 9/19; Karlin-Smith/Cancryn, Politico, 9/19; Facher/Florko, STAT News, 9/19; Zhou, Vox, 9/19; Cohrs/Wilkerson, Inside Health Policy, 9/19 [subscription required]; FAH release, 9/19; AARP release, 9/19, AHA release, 9/19).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.